USA steel and aluminum tariffs rise to 50%

On June 4, the Trump administration of the United States raised additional tariffs on steel and aluminum products from 25% to 50%. The United Kingdom was excluded from the tax increase. Although the United States’ goal is to block imported steel and activate domestic steel investment, it may not be achieved.

On May 30, US President Trump advocated “consolidating the US steel industry” and called for the protection of domestic industries. Lourenco Goncalves, chairman of the American Iron and Steel Association, said on June 3: “Tariff measures will correct trade imbalances and attract a large amount of investment back to the United States,” welcoming the increase in tariffs.

But equipment investment in the steel industry takes several years, and the cost of building a new steel plant is as high as trillions of yen. The United States is the world’s largest importer of steel. Imports account for 30% of steel consumption in 2023. Before progress is made in equipment investment, the United States will still need to rely on imports, and costs will continue to rise in the short term.

The price of steel in the United States has reached twice the global average. According to SteelBenchmarker, as of May 26, the average price of steel in the United States was $901 per ton. Due to the high proportion of imported steel, raising tariffs may further push up steel prices in the United States.

In industries such as automobiles and construction, vigilance against rising costs has intensified.

Ford Motor Company of the United States expects that the increase in costs caused by import tariffs will lead to a $1.5 billion reduction in profits. The steel and aluminum used in parts are affected by tariffs, leading to higher costs. “85% of the steel used in the United States is purchased domestically, but the price increase (caused by tariffs) still has an impact,” said Shelly House, Ford Motor’s chief financial officer, in May.

Japanese companies such as Toyota purchase most of their steel and aluminum from the United States. “The impact of tariffs is considered limited,” said Tomoyuki Suzuki, managing director of consulting firm AlixPartners. But on the other hand, some steel that cannot be produced in the United States, such as special steel, still needs to rely on imports from Japan.

If manufacturers cannot absorb the costs, they will inevitably pass them on to the prices of their own products. On June 2, the senior vice president of the US legal entity of Swedish steel giant SSAB warned: “Tariffs are positive for the domestic supply chain in the United States, but companies that rely on the global supply chain will face a greater burden.”

If the price increase of products such as automobiles leads to a decrease in demand, it may eventually affect the performance of large steel companies.

The profits of large steel companies in the United States have continued to deteriorate due to reduced steel supply and increased fixed costs. Cleveland-Cliffs announced on May 7 that it would suspend operations at six blast furnaces and mines in the United States. The transaction of Nippon Steel’s acquisition of US Steel has also come to an end, but US Steel has suffered a final loss for two consecutive quarters. Although the rise in steel prices is a favorable factor, the reduction in demand for automobiles and other products may further aggravate the deterioration of profits.

The Trump administration in the United States launched reciprocal tariffs in April and then decided to postpone the implementation of additional tariffs by various countries. The market generally worries that this will lead to chaos in the global supply chain and worsening inflation, and the sharp rise in US Treasury bond interest rates has become the fuse. This time, the United States may also be forced to take countermeasures based on the market reaction after the increase in steel and aluminum tariffs.